Financial Management Workbook Page 65 IT investment planning. 17. Will recommend scope for internal audits. 18. Will assist external auditors. Detailed skills of the Financial Management process owner The Financial Manager… Description Notes/Comments 1. Must possess sound numerical and financial skills 2. Must have the ability to interact successfully with all levels of Customer and IT organization management. 3. Must have a thorough approach to documentation and schedules. 4. Must have excellent communication and negotiation skills. 5. Must have good presentational skills. 6. Must understand the Customers' businesses and how IT can affect the delivery of their products or services. 7. Must accountancy and company financial reporting 8. Must be capable of contract or supplier management. 9. Must be conversant with statistical and analytical principles and processes. Use the notes/Comments column in different ways. If you are looking to apply for a process role, then you can check yourself against the list (with ticks or look to update your resume). If you are looking to appoint a process manager or promote someone from within the organization you can make notes about their abilities in the particular area. Financial Management Workbook Page 66 Template Job Description The Chief Financial Officer (CFO) 1. Oversees all financial management activities relating to the programs and operations of <<ORGANIZATION>> and reports directly to the Administrator regarding financial management matters. 2. Develops and maintains an integrated financial management system that complies with applicable accounting principles, standards, and other requirements of Federal, state and local financial management systems. 3. Directs, manages, and provides policy guidance and oversight of <<ORGANIZATION>> financial management personnel, activities, and operations. 4. Monitors the financial execution of the <<ORGANIZATION>> budget in relation to actual expenditures. 5. Works to ensure timely performance information for inclusion in financial reports and statements. 6. Reviews on a <<time scale (e.g. monthly, quarterly)>> basis the fees, royalties, rents, and other charges imposed by <<ORGANIZATION>> for the services and things of value that it provides and makes recommendations on revising those charges to reflect the costs incurred in providing those services and things of value. Financial Management Workbook Page 67 3.5 Business Justification Document IT Services Business Justification Process: Financial Management Status: Version: 0.1 Release Date: Financial Management Workbook Page 68 Business Justification Document for Financial Management The document is not to be considered an extensive statement as its topics have to be generic enough to suit any reader for any organization. However, the reader will certainly be reminded of the key topics that have to be considered. This document serves as a reference for HOW TO APPROACH THE TASK OF SEEKING FUNDS for the implementation of the Financial Management process. This document provides a basis for completion within your own organization. This document was; Prepared by: On: <<date>> And accepted by: On: <<date>> Financial Management Workbook Page 69 Financial Management Business Justification A strong enough business case will ensure progress and funds are made available for any IT initiative. This may sound like a bold statement but it is true. As IT professionals we have (for too long) assumed that we miss out on funds why other functional areas (e.g. Human resources and other shared services) seem to get all that they want. However, the problem is not with them, it’s with US. We are typically poor salespeople when it comes to putting our case forward. We try to impress with technical descriptions, rather than talking in a language that a business person understands. For example: We say We should say We have to increase IT security controls, with the implementation of a new firewall. Two weeks ago our biggest competitor lost information that is now rumoured to be available on the internet. The network bandwidth is our biggest bottleneck and we have to go to a switched local environment. The e-mail you send to the other national managers will take 4 to 6 hours to be delivered. It used to be 2 to 3 minutes, but we are now using our computers for so many more tasks. Changes to the environment are scheduled for a period of time when we expect there to be minimal business impact. We are making the changes on Sunday afternoon. There will be less people working then. Doesn’t that sound familiar? To help reinforce this point even further, consider the situation of buying a new fridge. What if the technically savvy sales person wants to explain “the intricacies of the tubing structure used to super cool the high pressure gases, which flow in an anti-clockwise direction in the Southern hemisphere”? Wouldn’t you say “too much information, who cares – does it make things cold?” Well IT managers need to stop trying to tell business managers about the tubing structure and just tell them what they are interested in. Financial Management Workbook Page 70 So let’s now look at some benefits of Financial Management. Remember that the comments here are generic, as they have to apply to any organization. Benefits Notes/Comments/Relevance Through a properly controlled and structured Financial Management process we will be able to more effectively help in the alignment of the delivery of IT service to the business requirements. This is achieved through the nature of the process by understanding such things as accounting models, charging policies and having more accurate information to help in the predication of budgets. A better understanding of these three components will allow more accurate spending on services that are needed by the business. A heightened visibility and increase communication related to Financial Management of Services for both business and IT support staff. The reader should be able to draw upon experience regarding the overall negative impact of the business when IT departments have been concerned with supplying high levels of services to the business that have not been budgeted, accounted for or being charged. Organizations and therefore IT environments are becoming increasing complex and continually facing new challenges. The ability to meet these challenges is dependent on the speed and flexibility of the organization. The ability to cope with more changes at the business level will be directly impacted by how well IT Departments can reduce the amount of time in loss of service due to bad Financial Management planning. (Reader, here you can describe a missed opportunity, due to bad Financial Management or a process dragged down by bureaucracy, i.e. not being able to deliver a critical service due to bad budgeting or unforeseen events) Financial Management Workbook Page 71 Noticeable increases in the potential productivity of end users and key personnel through reduced interruption times, higher levels of availability as the correct monies are being accounted for the right IT Services. The goal statement of Financial Management is to provide stewardship of the costs for IT Services and ensure alignment back to the business. By the very nature of this statement we can expect to start seeing a reduction in the costs of services due to better planning. Whether end users and staff take advantage of this is not an issue for IT professionals to monitor. Knowing that we have made an improvement is what we need to publish. An ITIL Financial Management process will guide you towards understanding the financial implications of all those necessary availability requirements needed in the IT infrastructure. This has real benefits as it may prevent an organization from spending money on areas of the IT Infrastructure where there really isn’t a need for building high availability services for the business. The Financial Manager will ensure that the cost of service has been fully assessed prior to starting a service improvement programme in conjunction with Problem Management and Service Level Management. With a sound Financial Management process we can expect an overall improvement in the level of Availability as better planning can occur under a structured, repeatable process. Any ITIL process has the potential to increase the credibility of the IT group, as they offer a higher quality of service, combined with an overall professionalism that can be lacking in ad-hoc activities. Refer also to the Financial Management Review Document for an assessment of your current process Financial Management Workbook Page 72 Financial Management Workbook Page 73 3.6 Accounting Policies IT Services Accounting Policies Process: Financial Management Status: Version: 0.1 Release Date: Financial Management Workbook Page 74 Introduction This document will give a brief introduction to the accounting for IT services. It will give guidelines for the conversion of standard financial account and centre information into cost of IT service. What is accounting? In the context of IT services, accounting is the activity that calculates the cost of service and assigns this cost to the customers. A cost model is the tool needed to calculate the cost of service. Activity based costing is an effective method of modeling costs and its generation gives information on what drives the costs and hence an indicator of where costs can be reduced. General Ledger This is the traditional method of financial recording. Each cost is assigned to a cost centre (a department, section, branch or unit) within the organization. The cost is then allocated to an account code (e.g. pay, training, software, hardware and so on) within the cost centre. [...]... terminology Cost Drivers The cost driver is how an activity is assigned to a service and/ or customer This is usually phrased in business terminology and is the best means for having a business volume metric linked to IT cost of service Services and Customers These are the customers and services that drive the IT costs Irrespective of whether IT charges it needs to understand which services and customers are... complexities and the tool used to build a cost model can vary from a simple spreadsheet to using specialty software The skill is to have enough detail available to make good business decisions while not going into too much detail and having a high maintenance cost Page 75 Financial Management Workbook Page 76 Financial Management Workbook 3.7 Budgeting Guidelines IT Services Budgeting Guidelines Process: Financial. . .Financial Management Workbook Methods of Allocation The methods of allocations are the means by which the general ledger costs are assigned to activities e.g people costs will be assigned on the basis of the amount of time spent on each activity A method of allocation is needed for each account code in a particular cost centre Activities These are all the activities performed For IT departments these... much detail and having a high maintenance cost Page 75 Financial Management Workbook Page 76 Financial Management Workbook 3.7 Budgeting Guidelines IT Services Budgeting Guidelines Process: Financial Management Status: Version: 0.1 Release Date: Page 77 . about their abilities in the particular area. Financial Management Workbook Page 66 Template Job Description The Chief Financial Officer (CFO) 1. Oversees all financial management. publish. An ITIL Financial Management process will guide you towards understanding the financial implications of all those necessary availability requirements needed in the IT infrastructure also to the Financial Management Review Document for an assessment of your current process Financial Management Workbook Page 72 Financial Management Workbook Page 73 3 .6 Accounting